Congress Passes Federal Trade Secret Legislation
Sometimes it snows in April, and sometimes – but not too frequently – Congress is actually able to pass legislation that will become law. This happened recently when the House passed the Defend Trade Secrets Act of 2016 on April 27, 2016. It is expected that President Obama will sign the bill into law. Here’s what employers need to know about the new law:
Federal Cause of Action: The law will create a federal cause of action for the owner of a trade secret to bring a claim for misappropriation under federal law and in federal court, so long as the trade secret is “related to a product or service used in, or intended for use in, interstate or foreign commerce.” Until now, trade secrets were governed only by state law.
Relief Available: The law allows a party to seek injunctive relief and damages for misappropriation of trade secrets, including exemplary damages equal to 2 times the amount of actual damages caused by the misappropriation.
Seizure of Property: The law creates a procedure for the party asserting a trade secret claim to request that the court order “the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” To obtain this relief, the court must hold a hearing, and the plaintiff must demonstrate that a temporary restraining order or injunction would be inadequate to prevent irreparable harm, among other things. If granted, the seized property will be taken into the custody of the court. In some cases, a special master may be appointed to locate and isolate all misappropriated trade secrets and to facilitate their return to the owner.
Statute of Limitations: The statute of limitations for claims under the new law will be 3 years after the date on which the misappropriation is discovered or should have been discovered.
Effective Date: The new law will not apply retroactively. Instead, it will only apply to acts that occur on or after the date of enactment.
No Preemption: The new law provides that it does not preempt other laws. As a result, state laws concerning the protection of trade secrets will remain in effect, and trade secret owners may have claims under both federal and state law when misappropriation occurs.
Takeaway: The Defend Trade Secrets Act of 2016 will create a federal cause of action for misappropriation of trade secrets and will give rise to a new federal body of law concerning trade secrets.